Financial Services Legislation Amendment Bill- First Reading – Video 3
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Financial Services Legislation Amendment Bill- First Reading – Video 3


a good 10 minutes on them on the virtues of this bill a madam Speaker I want to begin you know are often it’s customary at the beginning of these addresses to heap praise upon the minister who’s introduced the legislation and that’s generally appropriate I think the minister in this case has are well enough developed seats of his own value that I can leave it to one side and instead instead I just want to I want to track back a little bit to one of her to one of his predecessors actually because one of the interesting things about this bill is that it repeals the financial advisors Act 2008 and the minister who introduced that Act was the Honorable Lian Dalzell who at that time was the Minister of Commerce in that Labour government v Weber government is of course now the mayor of Christchurch and the reason that that piece of legislation was introduced at that time was because prior to that point we had something of a Wild West in respect of our regulation of the financial services industry and it became very very apparent to this house to commentators and to many many people who were badly burned that this simply was an editor quite adequate and coherent regulatory oversight of the sector and as Honorable Christopher Mason just spoke of that has huge consequences for people huge consequences and that is the significance of that legislation at the time and this legislation which replaces it we are talking about the regulation of a sector that we entrust that we entrust with the wealth with the assets of ordinary New Zealanders who are just wanting to do what we tell them to do in this house which is to save and invest and when it goes wrong that turns their lives upside down and at that time the fifth Labour government and ly and LZ land backed upon a path of regulatory reform and brought in the financial advisors act and it brought things together but what has become apparent over the 10 years since that time is that while everyone agrees that we need to have a coherent regulatory framework not all parts of it have worked and it’s entirely appropriate that in the years since then the the roving eye of the machinery of government has cast its eye the sector and cast its eye over the workings of the act and has determined that it is appropriate to look at a range of regulatory changes and so what we have before us is a bill that amends both the financial markets conduct back which was passed in 2013 and the financial service providers registration and dispute resolution act 2008 and that she repeals that financial advisors Act 2008 and their number of reasons for this and some of them have been well canvassed but one of the ones I want to touch on at the outset is the fact that we know there at the moment and part at least because of some of the quirks of the current regulatory arrangements we have huge numbers of New Zealanders who would benefit from high-quality and appropriate financial advice who simply don’t get it they simply don’t get it some really interesting reports came out the sooner earlier this year from a financial markets Authority who of course oversee much of what we’re talking about and they in particular we’re looking into KiwiSaver and of course KiwiSaver is now the biggest vehicle by which New Zealanders save for the future great initiative of the previous Labour government I think something like 40 billion dollars worth of assets now piled up and KiwiSaver and it’s great for New Zealanders future but it may it’s absolutely critical for the individuals who are saving within KiwiSaver but also collectively for us that those investment decisions are made well but what the Financial Markets Authority has uncovered now it read up the state here actually only three and a thousand people who invest and KiwiSaver get personalized advice advice about their investments only three per thousand that’s 0.3% now don’t mean to be unkind but that’s about the level of support for the ex parte gets and when you’re getting down to that you know that it’s a pretty pretty low number it’s harsh but it’s accurate only three and a thousand get personalized advice I I can tell the Honorable member that in my own electorate of Mountain Roscoe I received 6,000 more votes than the egg party received across the whole of New Zealand at the general election you see only three in a thousand and I think what we would like not that I check on these things but what I can but what I can what it is very valiant of the other remember to come to the defense of david seymour only three and a thousand people get that personalized advice before investing and KiwiSaver and what that means is that huge numbers are those people end up simply putting their KiwiSaver investments and to default funds they’re our fault fans aren’t always the end of the world but they always sit up to be the safe conservative place relatively low risk and for some people that will be an appropriate investment but in fact for many people it is not an appropriate investment because KiwiSaver by definition for most people is a long-term investment and it doesn’t particularly make sense to have your investments earning low returns over a very long term if you’re a person at the age of thirty you’re potentially saving for thirty five years into your KiwiSaver fund and in most cases it’s going to take make sense to take on a bit more risk realizing that you ride out the ups and downs and be better off at the end of it but because of that lack of quality advice huge numbers simply going into those default funds and so just to pick out those in the publicly available and report from the financial markets authority and at the ANZ Bank only six percent of Kiwi savers made an active choice about which fund they going into the ASB bank only 1.5 percent at the BN seed bank only three percent and that points to a lack of either there’s some sort of problem in the system it’s not necessarily a lack of advisors who are capable of giving advice but we have a system which is resulting in people not getting the advice that they would be an effort from and so that is one of the real reasons we’ve got to get on top of this issue and ensure that New Zealanders who are investing are you are getting advice and are getting quality advice and know that their advice is in the best interests so what does a bill do well it does a number of things one of the quite interesting and innovative things that it does is that it introduces the Kipp cassadee for the investors to receive Robo advice that is taking advantage of new forms of technology that isn’t necessarily talking to an advisor at an officer over the phone but potentially through an apple through a computer program and which you might enter your risk appetite your life situation your investment goals and through a series of algorithms you can receive Robo advice about the best kind of an investment for your circumstances it’s something that is in place in a number of other regulatory regimes and I think it’s very much worthwhile this bill making provision but I think it’s also worth saying and I’m sure members would agree it’s a kind of thing we want to give careful examination of at the Select Committee stage because again we’re dealing with people’s life savings and the minister’s given a very good overview of the way in which the proposed bill does seek to simplify and unify regulation across the sector at the moment we have authorized financial advisors a FAS and registered financial advisors RFA’s and the reality is that for most people who walk into their bank or walk into an investment shop they want to get advice they don’t particularly know what the difference is and in fact there’s been some feedback received I think through MB and their consultations which suggest that people think that re phase are qualified to a greater degree in perhaps they can have a greater degree of surety about the advice they receive from re phase or in fact if they actually have to reach a higher standard of compensate competency and be registered and so the framework that comes through in the bill that is before the house seeks to recognize that problem and say what we actually need is a unified framework and anytime anytime that a retail investor the ordinary mom or dad or person who wants some investment advice goes to an investment advisor they should know and have the confidence that that person a X and their best interests and that is enshrined in the bill that isn’t the case necessarily with all advisors at the moment they should be absolutely certain those people have a level of skill and competency that can be relied upon and that should be enshrined through the bill and through a code of conduct and through competency requirements and they should know there’s somewhere to go if it goes wrong and so through the bill we set up various mechanisms which allow there including a disciplinary process which allows fines of up to ten thousand dollars which I do have to say given the some of the assets that are at stake maybe sounds to me to be a little bit on the low side I just want to tag a couple of issues that I do think that the Select Committee does really need to have a really close look at in its consideration one is the difference between sales and service because when you talk to advisors in the sector particularly the small guys there is a real concern that sometimes sales and service get merged and there have been some pretty disturbing stories about big financial institutions incentivizing re phase at the moment to sell products to people and that is not acting in the best interests of the client which should be paramount in the regulation of financial services and the final thing we need to look at is that point to make sure that we’re not just having a regulatory framework which is good for the big end of town the big banks who have huge numbers but it actually also allows for a thriving network of independent smaller investment advisors who can give very good quality advice to clients Mr Speaker I commend this bill to the house and look forward to the next stage of its debate Mr Speaker I call Andrew Bailey Thank You mr. speaker

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